In a world where it seems like startups are created every other day and market economics remain largely unpredictable, securing funding for your biotech startup can prove to be an arduous task. Venture capitalists prefer tested and proven biotech enterprises, government- and NGO-backed funding remain ever so slightly out of reach, and every other funding outlet seemingly comes with its own set of hard-to-match requirements and specifications. What is the fate of the budding startup without experience in the harsh economic climate of today’s biotech ecosphere? As it turns out, it's not quite as bad as one would expect. It’s all down to knowing the ropes and peculiarities of the market.
Channel Your Fund Derivation Efforts In The Right Direction
While the marketability and overall appeal of a biotech company do play an integral part in the fundraising process, it’s important to note that investors will, in most cases, only commit if the biotech company fits their venture capital profile. Different classes of investors provide funding for different categories of companies under specific circumstances. Investors typically have a predetermined indication, sector and stage of development they intend on committing to. Some have a preference for bootstrapping early-stage companies, while others are more for companies already in the late-funding stage.
In the same vein, it will be counterproductive to approach a venture capitalist with a long history of providing funding for a specific biotechnology niche when your company falls outside that niche. The ideal approach would be first to understand what your needs are by conducting a market analysis and then defining your operational mandate before going on to outline VCs that match your needs and have backed up deals similar to yours in the past.
Holding Off On VCs Can Sometimes Prove To Be Beneficial
This year alone, venture capitalists along with angel investors have raised more than $758 million in funding for biotech companies. If there’s one story that statistic tells, it’s the fact that there’s no shortage of VC cash that's ready to bootstrap the next big thing in biotech.
That said, for a small startup that’s still in the process of sinking its roots in the industry, it is usually a better idea to hold off on venture capitalist involvement till much later -- especially if your fundraising goal is less than $1 million. For capital margins of this range, reaching out to private investors or brokering partnership deals are the ideal fund derivation faucets.